Uncertainty is always present in business, but in a recession it dominates our thinking. It takes special people to see opportunity in the face of it.
Normally, I don’t recommend that people read magazines other than Club & Resort Business. But I am going to make an exception in this case and recommend that you try to find the April 20, 2009 edition of The New Yorker. It contains one of the most important articles I have read, and also one of the most interesting.
On page 35, there is an article by James Surowiecki entitled “The Financial Page, Hanging Tough.” If you ever need ammunition to maintain or increase your marketing budgets, this is a must-read. Because if there was one message that came out of the Golf Industry Show and Club Managers Association meetings earlier this year, it was that the economy was having an impact on club memberships to some degree, but more importantly that waiting lists, which generally provide the funds for capital expenses, were drying up.
The central thesis of Surowiecki’s article is that in times like these, there are two competing emotions in dealing with business challenges: what the economist Frank Knight recognizes and differentiates as risk and uncertainty. They both feel the same way, but are vastly different.
Risk is what we deal with every day, especially during budget time. Risk factors are for the large part knowable, somewhat predictable, and our experience allows us to account for them and make rational business decisions anticipating them. Planning your F&B budget around anticipated banquets, weddings and events illustrates this point. We all are trying to market this capability and know we have to compete with other venues. We know what we are capable of and have history to guide us and provide a reasonable expectation of what we can plan for, so we can buy banquet supplies, maybe expand our ballroom capability, or contract for a tent. We may or may not meet budgeted expectations, but we are reasonable in our planning.
Uncertainty is something entirely different. Here, there are unknowable events (the recession) and when they occur, no one knows when they will end. So most of us hunker down, slash expenses, and hope for the best. Uncertainty is always present in our business lives, but in a recession it dominates most of our thinking and we make decisions accordingly. This is called “hope as a strategy.”
But this very well-written article goes on to cite example after example of companies that have marketed aggressively during recessions (and even during the Great Depression), and the dramatic successes they achieved.
Surowiecki also cites two economists, Peter Dickson and Joseph Giglierano, who argue that companies in recession periods have to worry about two kinds of failures. The first comes from decisions that may “sink the boat” (wrecking the company). Examples abound, but two stand out: Home Depot, which almost tanked when Robert Nardelli, to save money, fired all of the competent, retired craftsmen who served as salespeople. And then there was Circuit City, which did tank when the company fired all of the knowledgeable help and replaced them with minimum-wage employees. Incidentally, Nardelli is now CEO of Chrysler (hmmm?).
The other type of potentially bad decisions are those that may cause you to “miss the boat.” Here, a “hunker-down” mentality may cause you to not market for membership, not improve your F&B, not renovate your pool area, or cut back on your course maintenance. When you “miss the boat,” you may stay in business (you probably will) but you will be hobbled in the recovery, having lost membership to those clubs that didn’t want to miss the boat. You may survive this type of bad decision, but you will limp for a long time.
The lessons to take from this article are clear: History proves the race does go to the swift and favors the bold, and that recessions do cause the strong to get stronger and the weak to get weaker. But if you have the guts to reason through uncertainty, believe in your unique selling proposition, and forcefully take your message to your market, you almost never miss the boat. It takes special people to see opportunity in the face of uncertainty.
One last reason for reading this issue of The New Yorker: It also has a seven-page article on the restoring of an Old Tom Morris course found on the island of South Uist, fifty miles off the coast of Scotland. The club is called Askernish, and if you want a fascinating history of links courses, Old Tom, and the efforts to revive the course, it’s a great read.
William C. Donohue, Founding Publisher
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